IMF questions Pakistan’s claim of meeting $3 billion Standby Arrangement target

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Negotiations between Pakistan and IMF
Pakistan Flag (Right) and the IMF logo (Left)

In a surprising turn of events, the International Monetary Fund (IMF) delegation, led by mission chief Nathan Porter, expressed dismay over Pakistan’s premature declaration of meeting all structural benchmarks and targets under the $3 billion Standby Arrangement (SBA) program. The dissatisfaction was conveyed during a meeting with Pakistani officials as the IMF team began its review process.

The Pakistan finance ministry had issued an official statement asserting the fulfillment of all benchmarks even before the IMF team had the opportunity to complete its scrutiny and analysis of the country’s economic data. This premature claim caught the IMF delegation off guard, leading to a tense atmosphere during the initial review session.

Reports indicated that the IMF team grilled Pakistani officials, who appeared unprepared to address the situation adequately. Muhammad Aurangzeb, Pakistan’s newly-appointed finance minister and former CEO of Habib Bank Ltd, acknowledged the incident, assuring that such missteps would not occur in the future.

The discussions between the IMF team and the Pakistani finance ministry focused on finalizing the second review and agreeing upon the Memorandum of Economic and Financial Policies (MEFP). The successful completion of these discussions is crucial for the disbursement of the last tranche of $1.1 billion before the IMF’s Executive Board meeting scheduled for the second week of April 2024.

Possible mini-budget

Report also suggest the possibility of implementing a mini-budget was under consideration, particularly if the Federal Board of Revenue (FBR) faces challenges in meeting tax collection targets. The IMF may recommend adjustments to tax rates, including the General Sales Tax (GST), to generate additional revenues promptly.

Furthermore, discussions cantered on meeting quarterly tax collection targets from April to June, essential for achieving the annual objective of PKR 9,415 billion. Both parties underscored the importance of devising a strategic plan within the energy sector to address the persistent issue of circular debt accumulation.

Currently, Pakistan is navigating the financial strides with the assistance of IMF through a $3 billion Standby Agreement (SBA). The cash strapped nation is facing hardship in daily administration as inflation has skyrocketed leading to resentment in public. Meanwhile, the newly formed government in Islamabad, is trying to woo people as it has reached the helm without the popular support. The pre mature announcement of meeting all structural benchmark before IMF review highlights the government’s desperation in that direction.

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